Business Aspects of Internet Exchanges

1
Business Aspects of Internet Exchanges

• AFIX Technical Workshop
• Session 7

2
Outline of Content

• What makes a successful IXP?
• Setting up an IXP Key business decisions
• Co-op or independent?
• What kind of business entity?
• Should the IXP offer additional services?
• Who owns the assets?
• Ensuring financial sustainability
• Managing relationships 90 of the work!
• Case study the Kenya IXP

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What makes a successful IXP?

• Neutrality
• With respect to carriers, ISPs and co-location
  providers
• Should never be perceived to serve interests of
  one stakeholder at the expense of others
• IXP operated by ISP association or non-profit is
  ideal but not always achievable
• Robust and secure
• Can scale in size
• Financially sound and stable

4
The simplest model of all

• A box in a cupboard under the stairs
• Cheap, easy and not to be scorned
• The questions to follow still need answering!

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Key business decisions

• NB There are no universal solutions right
  choices depend on your circumstances!

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Co-operative or 3rd party?

• Co-op can be cheaper and easier to manage
• NB to avoid tragedy of the commons everyone
  wants to use it, no-one want to pay for
  maintaining it!
• Careful cost accounting is crucial

• 3rd party easiest for preserving neutrality
• For-profit operation is possible but not
  desirable in a market with only one IXP
• Can be good option where govt / regulator must be
  involved

• Whichever option is chosen Who manages the IXP
  and on what terms?

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What kind of business entity?

• Answer depends on choice of co-op / 3rd party /
  other
• What legal structures are available in your
  country? Aim for
• Easy and cheap to administer
• Have sufficient status to deal with regulators
  stakeholders
• Be able to enter into legal agreements

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What services to offer?

• IXP by definition must offer shared switched
  infrastructure so members can exchange traffic
• Other possibilities
• Route servers
• Facilities for private interconnect agreements
• Facilities to provide access to transit services
• Hosting and other co-location services
• Non-technical services eg lobbying networking

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Who owns the assets?

• Many IXPs start out with borrowed or donated
  equipment but clarity is still needed
• Who owns the physical infrastructure?
• If not the IXP, what are the terms of use?
• What happens if the owner merges with another
  company, is liquidated, withdraws from the IXP,
  etc?
• Who is responsible for insuring and maintaining
  equipment?

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Financial sustainability

• IXP costs can include
• Premises
• Power utilities
• Telecommunications
• Salaries
• Admin costs (legal accounting fees, etc)
• Equipment acquisition, maintenance insurance
• How much should members pay to participate?

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Funding options 1

• Monthly / annual flat fee
• Can be graded according to size of ISP
• Easy to administer
• Add a joining fee to cover set-up costs
• Can lead to dispute if some members generate much
  more traffic than others

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Funding options 2

• Sliding fees according to access bandwidth /
  traffic volume
• Can be considered where there is conflict over
  volume of use
• BUT requires IXP to monitor members traffic
  compromised neutrality?

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Funding options 3

• Fees according to services used
• Only applicable if IXP offers additional services
  eg. hosting
• Can be combined with flat fee OR sliding scale
  fee for basic IXP services

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Between ISPs

• Should ISPs pay each other for exchanging
  traffic?
• Short answer NO
• Long answer Its impossible to monitor traffic
  end-to-end ISPs are not telcos! Trying to do
  it admin and technical nightmare.

15
Managing relationships

• Stakeholders can include
• ISPs
• Regulator
• Government officials
• Policy makers
• Upstream transit providers
• Telcos
• 90 of the work ?

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Case study Kenya

• 2000 No IXP in Africa between Morocco and South
  Africa
• ISP services open to competition but Telkom
  Kenya controlled underlying infrastructure
• Telkom Kenya had exclusive right to operate a
  national backbone for purposes of carrying
  international traffic
• All internet traffic in Kenya exchanged
  internationally estimates that 30 of upstream
  traffic was to domestic destinations!

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ISPs organise

• Kenyan ISPs association (TESPOK) launched KIXP as
  neutral, non-profit IXP in November 2000
• Telkom Kenya complained to CCK that KIXP KIXP
  violated their exclusive right to carry
  international traffic
• CCK concluded KIXP needed a licence and shut it
  down within two weeks

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Impact of KIXP

• During the two weeks of KIXP's operation
• Latency dropped from average 1,200- 2,000
  milliseconds (via satellite) to 60-80
  milliseconds (via KIXP).
• Monthly bandwidth costs dropped
• 64 kbit/s circuit US 3,375 to US 200
• 512 kbit/s circuit US 9,546 to US 650

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Fighting back

• TESPOK argued
• KIXP was a closed user group therefore legal
  under Kenyas Telecommunications Act.
• Local exchange of domestic Internet traffic did
  not contravene Telkom Kenya's monopoly as all
  international traffic would continue to flow over
  its links.
• Telkom Kenya opposition fed by the fear of losing
  a significant portion of its international leased
  line revenues.

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Victory and a lesson

• CCK licence granted November 2001
• Ruling "An IXP is not an international gateway
  but a peering facility that enables ISPs to
  exchange local traffic
• Lesson NB to educate and have regulators on
  board from the start!

21
Discussion points

• What kind of IXP would work best in your country?
• What is the legal and regulatory position?
• Are there any stakeholders likely to oppose an
  IXP? On what grounds?